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To:StockShare
Publishing
Sent:
3/8/2009 3:16:13 P.M. Central Daylight Time
Subject: Market Report - 3/6/09
Market Report - 03/06/09
The market has dropped 21.3% in the last 4 weeks, with 7% of the decline
occurring the past week. The decline from the January 6th, 2009 High
has reached 29.4% as of this past Friday. This decline qualifies as
a "WOOP M down give up move IMHO. As you know I have been looking
for the S&P to reach the 660 price area for some time. As you know,
660 is 7X360 degrees from the all time high. Last Friday the intra day
low reached 666. There is a possibility that the S&P could decline
further to the 635-640 price level before a good rally can begin. I
doubt it will go that low, but I have to allow for it. This is why I
have kept my investment position at 25-30% of capital. Despite last
weeks decline my portfolio closed up for the week. If the S&P declines
below 660 next week I will add to my positions up to 50 % of capital.
The way I look at it, there is considerable evidence that a low of significance
is very close in price and time. I have listed my evidence below.
1) The NYSE Bullish Percent was at 4% at the October low, 8% at the
November low and is now at 12% despite the recent new lows. This is
a strong Bullish Divergence.
2) The Sum of the D and E ranked stocks on Accumulation/Distribution
hit 72.33% last Thursday. At the October low it hit 78% and at the November
low it hit 69.44%. Looking back through history, these are Bear Killing
Numbers.
3) The action last week was horrible as there was a Reif Distribution
Week on the IJR, IWM, MDY, DJT, DJU, SPX, NYA and the VLIC. This is
a sign of "give up" in my opinion as investors are throwing
the baby out with the bath water.
4) If you look at the Weekly Candle Chart on the S&P for the last
year and a half, you will see three drives to a possible low. (March
'08, November '08 and now. I am not an student of Elliot, but it looks
like 5 waves down to me.
5). The Percentage of Bears at the American Association of Individual
Investors hit 70% last week. This was an all time high for this index.
The last high was at 67% in October 1990, another bear market low. As
I remember it, I took my clients long that October for many of the same
reasons I am using now.
6) The Divergence on the New Lows Indicator still shows a large Bullish
Divergence
7) The top ranked securities ranked by price appreciation are the Contra
ETF's. Many appear to have made Climax runs. These folks will stampede
out of their positions on any significant up move. This will provide
considerable fuel once a rally gets started.
In summary, I like CAT, GE, NUE, NFLX , PG and STAR in the market right
now. If price declines below 660 next week I will move to a 50% Invested
position using the DIA.
Sincerely,
David Reif, CMT
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